Xerox has about $14 billion in debt, but plenty of cash to see it through 2003, when it is on the hook for about $4.4 billion of that amount, said Tutterow. And the risk that Xerox might have to refinance the approximately $5 billion in debt and trust preferred instruments that are coming due in 2004 is " minimal," he said.
The company had "significant cash flow in the fourth quarter and has made balance sheet progress," added Nick Nilarp, an analyst at Fitch Ratings.
In fact, Xerox is sitting on $2.9 billion in cash, said Christa Carone, a company spokesperson. Of that amount, $1.9 billion was "generated in 2002," she said. Xerox is "quite confident of meeting all its obligations this year and next without accessing the capital markets," she said.
The bond market hasn't always been receptive to Xerox. Not long ago, there were fears the company might have to file for bankruptcy protection. The company has been plagued by accounting scandals and a downturn in corporate spending on technology.
However, it has been restructuring itself since late 2000 and is now beginning to see results from its efforts, said Domenick Fumai, a vice president in fixed income research at BNP Paribas, New York.
During a conference call Tuesday, Lawrence Zimmerman, company chief financial officer, said Xerox is "well positioned" to meet its obligations.
Nevertheless, the ratings agencies have yet to be fully convinced of Xerox's turnaround and have placed the company firmly in junk territory.
Moody's Investor's Service rates the company's senior unsecured debt B1, while Standard & Poor's has assigned a corporate credit rating of double-B-minus, and Fitch gives it a double-B-minus long-term rating.
All three agencies have a Negative Outlook for Xerox. And that is not likely to change anytime soon.
The information is not yet available to "feel comfortable in changing the company's Outlook," which would be the first ratings criteria to be reviewed, said Molly Toll-Read, a director and a credit analyst at S&P.
The company would have to address the issues of its credibility, the sustainability of its turnaround, and its leverage, she said.
The recent earnings announcement by Xerox is the "continuation of a positive trend," said Toll-Read. But the trend is of relatively short duration, only going back three quarters, she added.
-By Michael C. Barr, Dow Jones Newswires; 201-938-2008; michael.barr@dowjones.com
Original Post